Millionaires Help Asia Private Bankers Earn More Than Bosses

A sommelier pours a glass of Burgundy during a wine tasting in the Hong Kong Wine Vault in Hong Kong, China, on Thursday, July 14, 2011. Prices of bottles of Lafite Rothschild 2000 went up 22 percent to $3,336 over the past year. Photographer: Jerome Favre/Bloomberg

“I don’t like to talk and not show things,” said the head
of Switzerland’s fourth-biggest wealth manager, reaching into
the black bag for the bank’s Asian wealth survey. The snapshot
of spending by the region’s growing ranks of millionaires,
released last week, tells a tale of rising consumption in the
past year: bottles of Lafite Rothschild 2000 up 22 percent to
$3,336; 500-person wedding banquet up 19 percent to $92,146;
Hong Kong golf club memberships going for $360,400.

Asia-Pacific millionaires outnumbered those in Europe for
the first time in 2010, according to a survey by Capgemini SA
and Bank of America Corp. More millionaires means more spending
and more demand for private wealth managers from banks such as
BSI SA, JPMorgan Chase & Co., UBS AG and HSBC Holdings Plc.
Recruiters say too many banks are hunting too few experienced
staff in the region, pushing up salaries and crimping profits.

“Good bankers have at least one offer on the table, if not
two,” said Collardi, 37. “Today, if you want to be successful
in hiring, you need to be forceful.”

Global demand for client relationship managers is expected
to rise 13 percent over 2011 and 2012, while growth in the Asia-Pacific region will be double that, PricewaterhouseCoopers LLP
said in an e-mail. That’s pushed top salaries in Singapore to
almost twice the level in Switzerland, the world’s biggest
offshore wealth manager, according to London-based recruitment
firm EMA Partners International.

Beating Swiss Pay

Senior private bankers in Singapore earn between $160,000
and $410,000 a year, while the comparative range in Switzerland
is $152,000 to $210,000, EMA estimates.

“People are simply paying too much and that cannot be
justified from an economic point of view,” said Thomas R. Meier,
Zurich-based Julius Baer’s CEO in Asia. If a bank pays 30
percent more than a person’s salary at his previous employer,
and the new recruit ends up adding just 5 percent more to
revenue, the bank will feel the pinch, the 48-year-old said.

The premium to attract somebody new in Asia is 20 percent
to 30 percent of their base compensation, said Matthew Streeton,
partner at The Consulting Partnership, a Singapore-based
recruitment firm. Usually, private bankers get a guaranteed
bonus in their first year on top of the base salary and
thereafter earn an annual bonus based on performance, he said.

Moving On

If new hires can move 30 percent of the assets they handled
to their new employer in the first 18 months, the banks are
lucky, said Noor Quek, Asian associate of London-based
executive-search firm Sulger Buel & Co.

Those who can’t move client assets tend to keep moving jobs
“on and on and on,” said Quek, the 61-year-old founder of
Singapore-based family office and wealth-planning adviser NQ
International Pte.

In Singapore and Hong Kong, only 25 percent of relationship
managers are able to bring more than 60 percent of the assets
they manage to their new employer, PricewaterhouseCoopers said
on Sept. 5 in a media release.

Experienced advisers who could bring in business to a new
employer are harder to recruit, said Hanspeter Brunner, chief
executive officer of Lugano, Switzerland-based BSI in Asia.

“Why should somebody working for a good bank, being well
taken care of, and having a good base of clients, move?” said
Brunner, 59, who has recruited almost 70 private bankers between
Singapore and Hong Kong in the last 18 months.

Overtaking the Boss

As an example of the discrepancy in salaries between Europe
and Asia, Brunner cited BSI’s Asia head of credit who makes more
money than his boss, the group head of credit in Switzerland.
“One’s very well-paid for the Swiss environment and the other
is well-paid for the Asian environment,” he said.

Switzerland had about $1.7 trillion in offshore private
banking assets at the end of 2010, according to The Boston
Consulting Group, which counted those with over $1 million in
investable assets. Singapore, the fifth-largest offshore
destination, had $512 billion. Including domestic clients,
Switzerland was the third-biggest with $2.6 trillion, while
Singapore was sixth with $966 billion.

Asia’s star has been rising as Europe struggles with the
sovereign debt crisis and regulators in the U.S. and Europe
crack down on tax evasion. The Swiss government agreed in March
2009 to adopt international standards on the exchange of
information on tax evaders after being accused by Germany and
the U.S. of helping to shelter cheats. That was the biggest
change to Swiss banking secrecy laws since their introduction in
1934.

Rising Costs

In 2007, before the financial crisis, costs for private
bankers in the Asia-Pacific region, including salaries, were
about 57 percent of the revenue they generated, according to
PricewaterhouseCoopers. This year, cost-to-income ratios are
forecast to be 82 percent in Singapore and Hong Kong, and about
70 percent in Switzerland, the firm said.

The principal factor adding to costs, especially in Asia,
is compensation, said Roman Scott, founder of Singapore-based
alternative investment firm Calamander Group. “Labor makes up
about 60-65 percent of the costs of a private bank,” he said.

Rising costs “will be an important factor in determining
compensation packages” in future, said Alex Fung, the 53-year-old chairman of Societe Generale SA’s private banking division
in Asia Pacific.

Recruiting Race

Firms across the region are looking to expand private
banking teams.

Zurich-based UBS, Switzerland’s largest bank, is expanding
its team to 1,200 from 900, said Kathryn Shih, regional head of
wealth management. JPMorgan intends to add 100 to the 140 it had
last year, said Hong Kong-based Andrew Cohen, CEO of the
division that caters to those with more than $30 million in
investable assets. HSBC has expanded headcount in Singapore to
450, from 370 three years ago, according to Nancie Dupier, chief
executive of private banking in South Asia.

The global banks are competing for staff with local rivals.
United Overseas Bank Ltd., Singapore’s smallest bank by market
value, has 40 relationship managers and is looking to add
another 160 in five years, said Wilson Aw, the 47-year-old head
of the division.

Asia’s 3.3 million high-net-worth individuals had $10.8
trillion in assets, compared with the $10.2 trillion accumulated
by their 3.1 million counterparts in Europe, according to the
report published in June by Capgemini and Bank of America’s
Merrill Lynch Global Wealth Management.

Chinese Millionaires

The number of millionaires in Asia’s 10 major economies,
excluding Japan, may more than double in the five years ending
2015, when half of them will be in China, according to the Aug.
31 study by Julius Baer, compiled with CLSA Asia Pacific Markets.
Chinese millionaires alone will hold $8.76 trillion by 2015, the
report forecasts.

Recruiters say private bankers need an apprenticeship
because wealthy clients expect to be advised by someone with
experience who can understand their goals.

“If the client is 65, he might want to talk about
different topics than going out drinking on a Friday night,”
said Brunner of BSI. “He might want to talk about his dreams,
his fears and what might happen if he falls off the chair
tomorrow.”